Category: Forex News, News

Dovish BoE hold could weigh on Pound Sterling

By Published On: June 20, 20244.6 min readViews: 1340 Comments on Dovish BoE hold could weigh on Pound Sterling

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  • Pound Sterling edges lower after posting small gains on Wednesday.
  • The Bank of England is forecast to maintain bank rate at 5.25%.
  • Vote split could trigger a reaction in Pound Sterling.

GBP/USD stays relatively quiet and fluctuates in a tight channel above 1.2700 in the European morning on Thursday. The Bank of England’s (BoE) monetary policy announcements could trigger the next big action later in the session.

The BoE is widely expected to leave the policy rate unchanged at 5.25% following the June policy meeting. Because there won’t be a post-meeting press conference, investors will scrutinize the policy statement and the vote split.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.
Read more.

Next release: Thu Jun 20, 2024 11:00

Frequency: Irregular

Consensus: 5.25%

Previous: 5.25%

Source: Bank of England

In case more than two policymakers vote in favor of a rate cut, the initial market reaction could cause Pound Sterling to weaken against its rivals. On the other hand, GBP/USD could stay in range if the BoE refrains from making any noticeable changes to its policy statement and the vote split remains the same, with seven officials voting for a hold. 

In the second half of the day, the US economic docket will feature weekly Initial Jobless Claims, alongside Housing Starts and Building Permits data for May.

If there is a sharp decline in the number of first-time application for unemployment benefits, with a reading at or below 220,000, following the previous week’s big increase, the USD could gather strength against its rivals in the second half of the day.

Investors will also continue to pay close attention to comments from central bank officials during the American trading hours.

GBP/USD Technical Analysis

GBP/USD trades within a touching distance of the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50, reflecting a lack of directional momentum.

GBP/USD faces key support at 1.2700 (200-period Simple Moving Average (SMA), lower limit of the ascending channel). If the pair drops below this level and starts using it as resistance, 1.2640 (100-day SMA) could be seen as next support before 1.2600 (psychological level, static level).

On the upside, resistances are located at 1.2740 (100-period SMA), 1.2800 (psychological level, static level) and 1.2850 (end-point of the latest uptrend).

 

  • Pound Sterling edges lower after posting small gains on Wednesday.
  • The Bank of England is forecast to maintain bank rate at 5.25%.
  • Vote split could trigger a reaction in Pound Sterling.

GBP/USD stays relatively quiet and fluctuates in a tight channel above 1.2700 in the European morning on Thursday. The Bank of England’s (BoE) monetary policy announcements could trigger the next big action later in the session.

The BoE is widely expected to leave the policy rate unchanged at 5.25% following the June policy meeting. Because there won’t be a post-meeting press conference, investors will scrutinize the policy statement and the vote split.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.
Read more.

Next release: Thu Jun 20, 2024 11:00

Frequency: Irregular

Consensus: 5.25%

Previous: 5.25%

Source: Bank of England

In case more than two policymakers vote in favor of a rate cut, the initial market reaction could cause Pound Sterling to weaken against its rivals. On the other hand, GBP/USD could stay in range if the BoE refrains from making any noticeable changes to its policy statement and the vote split remains the same, with seven officials voting for a hold. 

In the second half of the day, the US economic docket will feature weekly Initial Jobless Claims, alongside Housing Starts and Building Permits data for May.

If there is a sharp decline in the number of first-time application for unemployment benefits, with a reading at or below 220,000, following the previous week’s big increase, the USD could gather strength against its rivals in the second half of the day.

Investors will also continue to pay close attention to comments from central bank officials during the American trading hours.

GBP/USD Technical Analysis

GBP/USD trades within a touching distance of the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50, reflecting a lack of directional momentum.

GBP/USD faces key support at 1.2700 (200-period Simple Moving Average (SMA), lower limit of the ascending channel). If the pair drops below this level and starts using it as resistance, 1.2640 (100-day SMA) could be seen as next support before 1.2600 (psychological level, static level).

On the upside, resistances are located at 1.2740 (100-period SMA), 1.2800 (psychological level, static level) and 1.2850 (end-point of the latest uptrend).

 

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